Legal Tip 171: Can Minor Children Purchase Property?

Legal Tip 171: Can Minor Children Purchase Property?


A minor child is one under the age of 18. Can they buy and own property?

Yes they can.


Children generally do not have legal capacity until they are 18 years of age. Under 18 they are considered legally disabled when it comes to civil acts such as (relevant to property)

• entering contracts.
• Disposing of property
• Settlement of a property
• Mortgage of a property
• Creating a trust

See section 8 MINORS (PROPERTY AND CONTRACTS) ACT 1970 NSW

MINORS (PROPERTY AND CONTRACTS) ACT 1970 - SECT 6 Definitions

Each state has separate legislation on this topic – I will only refer to NSW laws, but other states will have similar provisions.


But a minor child can enter a ‘civil act’ and it can be binding on them when it is for their benefit. S 19 MINORS (PROPERTY AND CONTRACTS) ACT 1970 - SECT 19 Beneficial civil act


S 28 covers a minor making a certified disposition – such as selling a property. A solicitor can give a certificate and this can act as protection to the other party to ensure that the disposition is binding. This basically means if you are buying from a minor make sure the minor has received legal advice and they have a solicitor’s certificate otherwise the contract may not be binding.

MINORS (PROPERTY AND CONTRACTS) ACT 1970 - SECT 28 Certified disposition by a minor


S29 covers a disposition to a minor – such as purchasing property. Similar to s28 – make sure the minor has a certificate.

MINORS (PROPERTY AND CONTRACTS) ACT 1970 - SECT 29 Certified disposition to a minor


Therefore a minor can purchase and can own property.

Because a minor can buy and own property this leads to various strategies which can be implemented. But before you get too excited please wait for my tax tips on this topic, and then to get you excited once again check out my forthcoming strategy tip.


Also keep in mind that even if a child could buy property they are unlikely to be able to find a bank willing to lend them money until they reach the age of 18. Wait for my loan tip on this one.

 

Terry - You cured my need for reading glasses

 

The child could encounter issues with owning land however.

1. Taxation and excepted income. Punitive tax rates apply to those aged under 18 owning property that produces rent. If a loan is not used or legally permitted then positive gearing could be a concern and at a tax rate of up to 66% it could pose a problem;

2 Land tax. The principal place of residence exemption cant usually be used by a minor other than if their property adjoins the parents home AND all the property is occupied by the family. Or if the whole family reside in the child's property. This strategy is really one for the uber wealthy who may live on more than one land title. Can be combined with an apparent purchaser deed perhaps and otherwise asset protection may need high level legal advice;

3. Main Residence CGT exemption. Very similar to the land tax issue

and the parents can be exposed to asset protection issues when the funds are provided to the child.

 

I don't know what happened there. I copied and pasted from a word file, but it seems to have changed the font.

 

Uni 101....Change the font and its your own work.

 

A child landlord collecting the rent

 

Hi Terry, the search button can't find me your tax tip or strategy tip on minors owning property. Do you know the tip number of links?

 

it’s only this thread. I don’t think I have written a tax tip. Will s arch later when I get home